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On March 30, 2016, Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia stripped MetLife of its designation as a nonbank systemically important financial institution (nonbank SIFI). She held that the designation was arbitrary and capricious as the Financial Stability Oversight Council (FSOC) failed to follow proper administrative procedures during the evaluation process. Just over a week later, FSOC walked down the hall of the U.S. Courthouse at 333 Constitution Avenue, NW and filed its appeal. On October 24, 2016, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments in that appeal.
This question of administrative procedure again took center stage during oral arguments. However, most of FSOC’s briefing and oral arguments focused on whether FSOC followed the interpretive guidance it issued to provide potential SIFI candidates direction on how FSOC would conduct these evaluations (the Guidance). The trial court argued that FSOC deviated from the Guidance in two key ways. First, FSOC failed to evaluate MetLife’s “vulnerability to material financial distress before addressing the potential effect of that distress.” (FSOC Brief at 19).
Second, the trial court held that FSOC failed to comply with the Guidance by omitting detail how the collapse of MetLife would specifically impair the financial markets. Specifically, FSOC “never projected what the losses would be, which financial institutions would have to actively manage their balance sheets, or how the market would destabilize as a result.” (FSOC Brief at 19). The trial court also held that FSOC “improperly failed to consider costs to MetLife resulting from the designation.” (FSOC Brief at 19).
FSOC argued that the trial court erred because, while Dodd-Frank does lay out 10 factors for FSOC to consider in evaluating a company for SIFI status, neither Dodd-Frank nor the Guidance lays out a requirement for FSOC to assess the likelihood of financial distress as this is nearly impossible to predict. FSOC also argued that neither Dodd-Frank nor the Guidance requires FSOC to “forecast the collapse of the next financial bubble and predict the specific effects it will have on particular companies” or the potential costs to MetLife associated with receiving the nonbank SIFI designation. (FSOC Brief at 26, 50).
In addition to refuting FSOC’s arguments described above, MetLife raised additional points during its oral argument including the fact that FSOC did not take into account the important distinctions between banks and insurance companies including the fact that insurance companies are monitored closely by state regulators. In addition, FSOC failed to properly take into account the advice of those on the council with insurance expertise including the independent insurance expert who voted against the designation and the non-voting representative from the National Association of Insurance Commissioners (NAIC) representing the state regulators.
The court gave no indication as to when it would issue a decision. However, any decision will mostly likely be appealed either to the D.C. Circuit en banc or directly to the United States Supreme Court.
Eugene Scalia from Gibson, Dunn, and Crutcher LLP argued on behalf of MetLife and Mark Stern from the U.S. Department of Justice argued on behalf of FSOC.
A copy of FSOC’s appellate brief is located here:
A copy of MetLife’s appellate brief is located here:
Audio of the oral arguments is located here. It is just over an hour.

On March 30, 2016, Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia stripped MetLife of its designation as a nonbank systemically important financial institution (nonbank SIFI). She held that the designation was arbitrary and capricious as the Financial Stability Oversight Council (FSOC) failed to follow proper administrative procedures during the evaluation process. Just over a week later, FSOC walked down the hall of the U.S. Courthouse at 333 Constitution Avenue, NW and filed its appeal. On October 24, 2016, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments in that appeal.
This question of administrative procedure again took center stage during oral arguments. However, most of FSOC’s briefing and oral arguments focused on whether FSOC followed the interpretive guidance it issued to provide potential SIFI candidates direction on how FSOC would conduct these evaluations (the Guidance). The trial court argued that FSOC deviated from the Guidance in two key ways. First, FSOC failed to evaluate MetLife’s “vulnerability to material financial distress before addressing the potential effect of that distress.” (FSOC Brief at 19).
Second, the trial court held that FSOC failed to comply with the Guidance by omitting detail how the collapse of MetLife would specifically impair the financial markets. Specifically, FSOC “never projected what the losses would be, which financial institutions would have to actively manage their balance sheets, or how the market would destabilize as a result.” (FSOC Brief at 19). The trial court also held that FSOC “improperly failed to consider costs to MetLife resulting from the designation.” (FSOC Brief at 19).
FSOC argued that the trial court erred because, while Dodd-Frank does lay out 10 factors for FSOC to consider in evaluating a company for SIFI status, neither Dodd-Frank nor the Guidance lays out a requirement for FSOC to assess the likelihood of financial distress as this is nearly impossible to predict. FSOC also argued that neither Dodd-Frank nor the Guidance requires FSOC to “forecast the collapse of the next financial bubble and predict the specific effects it will have on particular companies” or the potential costs to MetLife associated with receiving the nonbank SIFI designation. (FSOC Brief at 26, 50).
In addition to refuting FSOC’s arguments described above, MetLife raised additional points during its oral argument including the fact that FSOC did not take into account the important distinctions between banks and insurance companies including the fact that insurance companies are monitored closely by state regulators. In addition, FSOC failed to properly take into account the advice of those on the council with insurance expertise including the independent insurance expert who voted against the designation and the non-voting representative from the National Association of Insurance Commissioners (NAIC) representing the state regulators.
The court gave no indication as to when it would issue a decision. However, any decision will mostly likely be appealed either to the D.C. Circuit en banc or directly to the United States Supreme Court.
Eugene Scalia from Gibson, Dunn, and Crutcher LLP argued on behalf of MetLife and Mark Stern from the U.S. Department of Justice argued on behalf of FSOC.
A copy of FSOC’s appellate brief is located here:
A copy of MetLife’s appellate brief is located here:
Audio of the oral arguments is located here. It is just over an hour.